PROPERTY prices have always been a dubious issue in Cyprus. One reason is that it is a very small property market without the volume of transactions that would give a reliable indication of price trends and values. The fact that banks needed 10 to 15 years to repossess properties on which loans were not being serviced also distorted prices, keeping them unjustifiably high.
Then there was also the habit of property owners to inflate the price of their house or plot and insist this was the value, even if there were no buyers. There would be people claiming their home was worth €2 million even if they found nobody to pay the ridiculous asking price. Someone would occasionally be found to pay an extortionate asking price but it was an exception rather than a confirmation of the inflated values.
Even the Land Registry Department took advantage of this mindless inflation of values, because it allowed it to collect higher transfer tax when a property was sold. The department, as a matter of routine, would refuse to accept the price on the sales contract and impose tax on the price arbitrarily decided by its officials, who based their evaluation on the prices supposedly paid for other properties in the same area.
The justification for doing so was based on the suspicion that money had been paid under the table, so that a smaller transfer tax would be paid. It was a ridiculous way for a department of the state to behave, but in Cyprus even the state authorities contributed to the efforts to inflate property values. And this habit continues to this day.
The other day it was reported that the values on which we would be paying Immovable Property Tax (IPT) would be those prevailing in January 2013, even though the Land Registry admitted that prices, on average had fallen by about 15 per cent since then. And we would not have known this if it had not been cited as an explanation for the lower transfer tax paid by the First Lady for the Limassol plot she had bought from the Church; apparently, she paid transfer tax on 2014 land values.
While for IPT purposes, it is understandable that property values would be arbitrarily decided by Land Registry officials, but the Technical Chamber ETEK is absolutely right in demanding that the criteria and assumptions used for the calculations should be made public. People have the right to know how the state made its evaluations because they also have the right to question them.
It is high time that Land Registry officials were made accountable for their decisions. They have been allowed for too long to arbitrarily determine property values, happily inflating them in order to boost tax revenue for the state, and oblivious to the distortions caused to the property market. Making them accountable and forcing them to explain the methodology behind their valuations would limit their ability to abuse their power.